An oft-quoted refrain has that Americans think that 100 years ago is ancient
history, while Europeans think 100 kilometers is another country. Both these
factors came into play this week when a combination of Europe's fear of
projecting its power and America's random amnesia contributed to a Russian
march on Georgia with no opposition. The old jokes about Europe [1] appears
more realistic by the day.

As of Thursday, at least the US had the good grace to admit its erroneous
understanding of the Russian threat, with President George W Bush ordering an
aid airlift to Georgia. He will, however, find it lonely going in Georgia as
his putative European allies have either contributed to the great sale of
Georgia or have no stomach

for engaging the Russian bear for any further conflicts.

French President Nicolas Sarkozy, who currently holds the rotating ("revolting"
may be a better word, but we are getting ahead of ourselves here) chairmanship
of the European Union, effectively signed over Georgia's existence to the
Russians by agreeing to the latter's proposal for the continued presence of
Russian "peacekeepers" in Georgia. This is the excuse being used by the
Russians for their presence in the town of Gori, even as the military has kept
Georgia's capital Tbilisi firmly in its sights. More importantly, the accord
brokered by the French makes no mention of Georgia's territorial integrity, in
effect allowing for a takeover of the breakaway South Ossetia by the Russians,
at the very least.

While asking or begging for peace, no European leader has really come out with
strong statements against the Russians. For their part, major European powers
such as Germany seem willing to do anything to avoid upsetting the Russians
just before winter; this is almost entirely due to the success of Russia's
energy policy or more simply the ability of the country to charge any arbitrary
price it so chooses.

It was thus left to some of the newest entrants to the European Union, such as
the Baltic states and Poland, to declare some degree of solidarity with the
Georgians.

Georgia is a small nation on the Black Sea coast between Russia and Turkey, yet
its strategic potential is evident, all the more so with both the US and Europe
having to come to terms both with a belligerent Russia and an Islamic Turkey
(see A Turkish
theater for World War III Asia Times Online, July 25, 2008). Despite
all that, much as the continent did nothing when Adolf Hitler marched into
Czechoslovakia, it chooses to do nothing when Russia marches into Georgia.

More than energy is at stake. Europe realizes that its demographics have
weakened beyond repair, to the point where its countries cannot fight any
threat outside their immediate borders. Secondly, there is the issue of Europe
itself being an artificial entity, held together by a common currency and
unsustainable subsidies.

While the average French farmer would be happy taking his annual check from
Brussels, he is unlikely to put on the battle fatigues and march to the defense
of Poland from the Russians. The centuries-old habit of surrendering before
firing a shot is more deeply ingrained into the French psyche than all of the
empty European slogans ever could. Much the same can be said of the Spanish,
Italian and Belgian contingents; while the Germans may well retain their combat
instincts they are unlikely to ever march again on their own accord.

Sellout Brits
All of this though doesn't count as the worst thing to have emerged this week.
That particular "honor" should go to the British Prime Minister Gordon Brown,
who appears to have negotiated late last year a surrender agreement on the side
with Muqtada al-Sadr's Shi'ite Mahdi Army in return for the remnants of the
British army leaving the southern Iraqi city of Basra in one piece. That the
agreement was put in place at all is bad enough, the fact that Britain's allies
were left uninformed until the last minute only compounds the poor show.

Exposed in British newspapers this week, the agreement casts a pall on the
historical record of the proud British army. Defending the abject surrender to
a terrorist group though, British officials were quick to point out that they
lacked the "correct equipment", which I take to mean referred not as much to
the paucity of guns and bullets as it did to the absence of political will.

The reason is that increasingly isolated in Europe, Britain finally has bowed
to demands from its pacifist neighbors; in the process turning its back on the
US as well as the need to do the right thing in Iraq. No more "stiff upper lip"
for them, instead we have been treated to the grand spectacle of an army
turning tail at the merest mention of personnel losses.

This speaks volumes about where the rest of the continent will be headed soon.
What possible hope is there for Europe when its only army of any substance -
not to mention proven historical successes - behaves in such a fashion? The
idea of the British hiding behind the coattails of Muqtada will provide an
image for the next few generations of Muslims keen on taking over Europe. The
latter will be convinced now more than ever that Europe will not even fight any
concerted advance.

Declining economies
As if the news from the political and strategic fronts wasn't bad enough,
recent economic news from Europe has also been bad. The German economy declined
by 0.5% for the second quarter, showing in its wake that any notions of the
European economy being a stabilizing force against the destruction of the US
economy were completely unfounded.

Other economies, including the French, have also showed poor data on both the
production and consumption side. The main economies inflated by property price
bubbles, such as Ireland and Spain, have fallen victim to the same forces
affecting the US; namely, a deadly combination of falling asset prices and
gargantuan leverage that has decimated the accumulated wealth of two
generations, in turn hurting domestic consumption. (Even sales of beer have
declined in Western Europe - people being unable to afford the latest Milanese
fashion is one thing, but to forgo their favorite tipple is quite another
matter altogether.)

Meanwhile, news from European banks [2] has turned out to be worse than
expected. As the banks announced results for the first half of the year (on a
side note, you have to admire their laid-back attitude, reporting results
almost a month after their US counterparts) the sea of red ink threatened to
overwhelm their capital bases.

It is noteworthy that European banks have more lenient accounting standards
than their US counterparts and yet have recognized more losses since last year
on the US subprime crisis than their cross-Atlantic counterparts. It boggles
the mind to think about what would happen if these banks adopted American
standards.

Even the mighty European Central Bank (ECB) last week signaled its decidedly
compromised position by declaring a unilateral ceasefire in the war against
inflation; that has been its sole policy plank for the past few years. The
reason was the increasingly turbulent relationship between the ECB and the
powers that be politically. For its part, the Bank of England also signaled
that interest rates would remain stable, despite a sharp decline in house
prices and retail sales, as its flexibility to cut rates had been undermined by
the government's excessive borrowings.

As I wrote in previous articles (see
Euro-trash Asia Times Online, March 11, 2008) , the notion of these
countries supplanting the US as the global growth engine was always suspect;
this week the currency and other markets finally took cognizance of the facts
and sent both the euro and and the British pound tumbling against the
greenback. Equities have been sold off aggressively in Europe as investors
finally realize the futility of even thinking that Europe could help diversify
their exposure to US investments; on the contrary, their losses in Europe have
been higher than those in the US.

While the fluctuations of currency and equity markets are hardly fodder for
long-term strategic analysis, the fact that the patina of global goodwill has
been lifted this quickly from Europe helped to highlight, once again, the
dominance of market capitalism over any other form of economic management.

European weakness is thus not a passing fad; it appears to be a long-term
secular decline from both a strategic and an economic perspective. Their
sclerotic global standing is but a result of socialist policies that have
helped push the best and brightest away from the region, leaving in their stead
a bunch of subsidy grabbers and welfare cheats.

Flush with commodity wealth, both the Russians and the Arabs may be eyeing
Europe for their expansionist policies. Thankfully for the Europeans, the
latter group cannot muster anything more threatening than a bunch of camels at
this point; at some stage in the next 20 years though that condition will
change, especially if both Turkey and Pakistan are fully inducted into the
fighting forces of the Wahhabi clans.

For now, that leaves Europeans contemplating coexistence with an increasingly
belligerent Russia. With its economy doing rather well from the rise in oil
prices as well as ongoing industrial development, Russia is putting itself in a
position of strength. Unlike the sleepy bureaucrats in Brussels, the Russians
probably recognize the above strategic positioning, particularly with regard to
the Middle East; thus whatever is happening in Georgia and which could follow
in Ukraine appears part of a well-thought-out strategy.

As I chart the "progress" of the world towards a World War III situation, it is
not surprising that one of the preconditions of such an event - the emergence
of a dominant consolidator of power in Europe - should now be happening, albeit
from a source long thought dead in strategic terms. A Russia that takes on the
mantle of empire in Europe has more in common with the US than it does with
China or the Middle East over the long term.

Notes
1. My favorite European joke is "Heaven is a place where the police are
English; the chefs are Italian; the car mechanics are German; the lovers are
French and it's all organized by the Swiss. Hell is a place where the police
are German; the chefs are English; the car mechanics are French; the lovers are
Swiss and it's all organized by the Italians."
2. Analysis is based on releases by banks in the UK, France, Germany and
Switzerland.